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A central tenet of the GFSC's approach to the regulation of
funds is that the administrator of a Guernsey fund is required to
satisfy itself that the promoter of the scheme is "fit and
proper" by carrying out appropriate due diligence.
In the case of registered funds, the administrator is required
to certify at the time of the application that it has undertaken
due diligence on the promoter. In the case of authorised funds,
whilst the administrator must conduct due diligence on the
promoter, it is not required to provide warranties to the GFSC (who
conducts its own due diligence on the promoter as part of the
authorisation process).
To facilitate the licensing, authorisation or registration
process (as applicable), it is important that anyone who is not
already known to the GFSC and who:
is a principal of the promoter;
or
intends to sit on the board of the
fund, the general partner, the manager or the adviser
submits a "Form PQ" to the GFSC in a timely manner to
enable the GFSC to determine the suitability of each such person
and determine whether to grant the licence, authorisation or
registration (as applicable).
Who or what is the "promoter"?
The "promoter" is not specifically defined in the
legislation (indeed it is not even mentioned in some of the rules).
So who is the "promoter"?
The GFSC's "New Promoter Checklist" and the
GFSC's web page addressing the Fund Promoter Assessment both
state that the GFSC "regard[s] the "Promoter" of a
fund as the party ultimately responsible for its
success."
In our experience a number of factors can be considered when
identifying the promoter of a fund:
Who is "putting their name
to" the fund and "sponsoring" it?
Who is managing and/or providing
investment advice to the fund (i.e. who is deciding the investments
the fund will make)?
Who is responsible for distribution
and fundraising activities?
Who is ultimately responsible for the
fund's establishment, regulation and continued operations?
The GFSC's approach to new promoters
The GFSC expressly states that it "welcomes approaches from
high calibre promoters who have a favourable track record in the
establishment and/or management of investment funds" but, as
regards new promoters, advises that they should "submit a New
Promoter's Introductory Checklist to [the GFSC] in advance of
making a formal fund application [in the case of authorised funds].
The information provided will be used by us to carry out necessary
due diligence checks in advance of a formal application being
submitted which should enable a reduction in application processing
time."
For registered funds, the administrator will require the New
Promoter's Introductory Checklist to be completed to enable it
to warrant to the GFSC as regards the suitability of the promoter
(it is part of the due diligence materials which the GFSC may
demand from the administrator to ensure that the warranties are
being appropriately given).
Normally, a demonstrable track record in the promotion and
management of funds is required and the authorisation of intended
promoters by regulatory authorities in other jurisdictions is not
in itself generally sufficient.
Promoters do not receive a regulatory permit for being promoter
per se. A licence under the POI Law is only required if
the promoter is conducting controlled investment business.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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